Should Amazon Worry About Alibaba?

 | Jan 24, 2014 | 11:30 AM EST
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China's Alibaba Group is widely expected to debut in the U.S. this year, which should be biggest initial public offering of 2014 for the tech sector.

But what has not been considered is how the e-commerce giant's move will potentially affect Amazon (AMZN).

Alibaba already has all it can deal with on its home turf fighting the mighty Tencent and its powerful WeChat app. Alibaba is worried that the Chinese are developing habits to buy things within WeChat and not going to the separate Tmall or Taobao sites.

Aside from that battle, there's no doubt that Alibaba will eventually bump into the powerful Amazon. Consider this: Alibaba has been investing in U.S. e-commerce companies that compete with Amazon. First, it was Scott Thompson's ShopRunner and then it invested in David Rosenblatt's 1stdibs.

Alibaba Vice Chairman Joe Tsai recently told me in a Forbes interview that expanding internationally is very much on management's mind, and they believe they can offer users and merchants a different experience than what they get from Amazon.

In Amazon's world, merchants are faceless providers under the Amazon tent. But many merchants want to offer a more customized experience to users rather than a one-stop shop-and-scroll based Amazon's price vision. Alibaba hopes to offer personalization. It will not have mass distribution centers across the U.S. like Amazon has, so Alibaba would be foolish to offer a similar experience. What Alibaba does have is lots of cash. It is about twice as profitable as Amazon and eBay (EBAY) combined and can deploy that cash if it wants to expand more aggressively.

The pie will continue to grow for all e-commerce companies, but Amazon has never faced as strong a rival as Alibaba. When eBay competed against Alibaba in China seven years ago, it had its head handed to it. Alibaba will be competing on Amazon's home turf, but it is very determined. In any case, it could certainly weigh on Amazon's stock once Alibaba formally sets up shop in the U.S.

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